Hedge Fund Performance in 2024–2025: Strategy Winners, Fee Pressure, and HNW Access

Hedge funds promised to deliver uncorrelated, risk-adjusted returns — "absolute return" that would protect capital in downturns while participating in upside. The reality has been more mixed. After the strong performance across many strategies in 2022 (when traditional 60/40 portfolios suffered their worst year in decades), the 2023–2025 period presented a more challenging environment for most hedge fund approaches.

This guide examines what actually happened, which strategies delivered, and how HNW investors can access the asset class.

The 2024–2025 Environment

The 2024–2025 investment backdrop was characterised by:

• Ongoing disinflation in the US and Europe, with central banks beginning easing cycles
• Strong performance by US large-cap equities, concentrated in the technology and AI sectors
• High, but declining, interest rates across developed markets
• Geopolitical volatility (ongoing conflicts, US election cycle, trade policy uncertainty)
• A reversal in some 2023 trends, particularly in fixed income

This backdrop created divergent outcomes across hedge fund strategies.

Global Macro Funds

Global macro funds take directional views on currencies, interest rates, equities, and commodities at a macroeconomic level. The strategy delivered exceptional returns in 2022 as managers correctly anticipated and positioned for rate hikes. The 2023–2025 period was harder.

Performance in 2024–2025: aggregate returns from macro strategies were broadly flat to modestly positive in 2024, with dispersion between managers. The era of obvious macro trades (short bonds, long dollar) that characterised 2022 did not repeat.

Stand-out managers include Bridgewater Associates, Brevan Howard, and a cohort of discretionary macro boutiques that navigated the interest rate peak and the AI-driven equity rally. Systematic macro/trend-following (CTA) strategies underperformed in 2024 when trend signals were contradictory — markets repeatedly reversed before sustained trends established themselves.

The difficulty of macro: macro fund performance is notoriously cyclical. Several years of poor performance can be followed by a year of extraordinary returns when a major macro theme materialises. This lumpy return profile makes allocation decisions complex.

Equity Long/Short (L/S)

Equity long/short funds hold both long positions (expected outperformers) and short positions (expected underperformers), with net exposure less than 100%. The strategy aims to generate alpha from stock selection while reducing overall market exposure.

Performance in 2024–2025: a sustained bull market, concentrated in mega-cap technology stocks, was challenging for most L/S managers. Short books — particularly positions short of overvalued growth stocks — frequently cost performance in 2024 as AI enthusiasm drove valuations to extremes. The best performers were those with net long exposures concentrated in technology.

Fundamental L/S vs statistical arbitrage: fundamental L/S managers do qualitative stock analysis; statistical arbitrage ("stat arb") managers use quantitative signals to identify mispricings. Stat arb strategies generated more consistent, if lower-magnitude, returns in 2024–2025 than fundamental discretionary managers.

Beta creep: a persistent criticism of the equity L/S category is that many funds are effectively leveraged long equity funds with a small short book — not the market-neutral, uncorrelated return the category implies. Investors should examine net market exposure carefully.

Quantitative/CTA Strategies

Managed futures funds (Commodity Trading Advisors, or CTAs) trade systematically across futures markets in equities, bonds, commodities, and currencies, typically following trends.

2024 performance: after strong 2022 and reasonable 2023 returns, many CTA strategies struggled in 2024. Rate and commodity trends were choppy; bond markets reversed multiple times; the dollar trend was unclear. AQR Capital Management, Man AHL, Winton, and other large quant managers reported modest performance.

2025 recovery: as clearer trends emerged in 2025 — central bank easing cycles, AI-related sector leadership in equities — many CTA funds recovered. Trend-following performance is highly correlated with the presence of persistent trends in financial markets; when markets are range-bound or directionless, the strategy struggles.

Diversification properties: despite mixed recent performance, CTAs retain their long-term role as portfolio diversifiers. Academic and practitioner evidence consistently shows that CTAs provide positive returns during equity bear markets — the property that makes them most valuable. Allocating to CTAs primarily for their diversification in tail events, not for consistent annual performance, is the correct framing.

Multi-Strategy Hedge Funds

Multi-strategy funds allocate capital across multiple hedge fund strategies within a single fund structure. Firms including Citadel, Millennium Management, and Point72 have expanded their multi-strat platforms significantly.

The multi-strat boom: multi-strategy funds attracted massive inflows from 2020–2023 as institutional investors sought diversified, lower-volatility alternatives to single-strategy funds. The largest funds grew to $30–50 billion in assets.

Performance in 2024–2025: the largest multi-strat funds generally delivered returns in the 8–15% range — less spectacular than 2022 but ahead of traditional 60/40 benchmarks. The portfolio construction benefits of diversifying across many uncorrelated sub-strategies proved real.

The capacity constraint: multi-strat funds face diminishing returns as they grow — alpha becomes harder to generate with more capital. The largest funds have begun returning capital to investors or closing to new subscriptions.

Pass-through fee structures: large multi-strat funds have moved towards "pass-through" fee structures where all operational and research costs are charged directly to investors, in addition to management and performance fees. Total cost of ownership for investors in these funds can be 5–8% of assets annually — a very high hurdle for net-of-fee returns.

Fees: Ongoing Pressure

The classic hedge fund fee structure — "2 and 20" (2% management fee, 20% performance fee) — has eroded significantly:

• Average management fees are now closer to 1.3–1.5% for established funds
• Performance fees have compressed to 15–18% for many funds
• High-water mark provisions protect investors from paying performance fees on recoveries of prior losses
• Hurdle rates (requiring performance above a minimum return before fees apply) are more common

Despite this compression, hedge fund fees remain substantially higher than passive alternatives. The case for paying premium fees rests entirely on the manager's ability to generate alpha — returns above what passive exposure would provide. In practice, across the industry, most net-of-fee returns over five-year periods have not justified the premium over passive.

The alpha vs beta debate is real. Investors should interrogate whether a fund's returns reflect genuine manager skill or simply leveraged beta exposure.

UCITS Hedge Funds: Access for HNW Retail Investors

Most institutional hedge funds require minimum investments of $1–5 million and are restricted to qualified/sophisticated investors. For HNW individuals below these thresholds — or in jurisdictions where offshore fund access is restricted — UCITS hedge fund vehicles provide an alternative.

UCITS hedge funds are structured as regulated funds under the EU's UCITS framework, allowing them to be marketed to retail investors across the EU (and typically the UK post-Brexit under equivalent regimes). They replicate hedge fund strategies within regulatory constraints that include:

• Daily liquidity (versus quarterly for offshore funds)
• Leverage limits
• Diversification requirements

What UCITS hedge funds can and cannot do:

• They can trade long and short across equities, bonds, currencies, and commodities
• They cannot use the same degree of leverage as offshore funds
• Liquidity provisions are better for investors but constrain some strategies
• Performance fees are typically subject to high-water marks

Access routes: UCITS hedge funds are available through most financial platforms in the UK and EU. Many are listed on Euronext Dublin or the Luxembourg stock exchange. Platforms including interactive brokers, Hargreaves Lansdown, and offshore investment bond wrappers provide access.

Cost: UCITS hedge fund fees are typically lower than offshore equivalents but remain higher than passive alternatives.

Portfolio Construction Implications

For most HNW investors, a sensible approach to hedge fund exposure involves:

1. Modest allocation: 5–15% of the total portfolio, not a core holding
2. Strategy diversification: not all of any one strategy (e.g., not all global macro)
3. Fee scrutiny: net-of-fee returns must justify the premium over cheaper alternatives
4. Due diligence: understanding what beta exposures a fund actually carries, not just what it claims

The primary use case for hedge funds in a private client portfolio is diversification — accessing returns that do not correlate with the equity and bond markets that dominate most portfolios. Funds that have demonstrated genuine correlation reduction over multiple market cycles are the most valuable.

How Global Investments Can Help

Global Investments advises clients on alternative investment allocation including hedge fund exposure through appropriate vehicles — UCITS funds, offshore fund platforms, and multi-manager alternatives. We conduct ongoing monitoring of manager performance and fee competitiveness, and help clients avoid the common mistake of overallocating to strategies that look attractive after a period of strong performance.

Hedge funds and alternative investments carry significant risks including the risk of total loss of capital. Past performance does not indicate future results. This article is for general information only and does not constitute financial or investment advice. Hedge fund investments may not be suitable for all investors.